Morgan Stanley analysts believe that despite Nio Inc.'s (NYSE:NIO) price cuts, the market's focus will likely soon shift back to execution after today's rally.
NIO shares are up around 7.5% at the time of writing, trading above the $8.30 mark. Earlier in the session, the stock hit a high of $8.60 per share after the Chinese electric vehicle maker said it would reduce prices across all its models and discontinue free battery-swapping services for new customers.
"NIO reckons its price cuts announced today are a well-considered move that also comes from a position of strength. On one hand, the removal of free/bundled battery swaps from the car balances the rights of existing users while lowering the purchase price. On the other hand, the monetization of NIO's battery swap network shows their confidence in the maturity and value add of their energy replenishment ecosystem," said the analysts, who have an Overweight rating and a $12 price target on the stock.
"That said, they gauge the price cuts may boost sales of existing models by 10-20% sequentially, underpinning volume resurgence into 2H23."
The analysts concluded that from a financial perspective, the immediate top-line impact should be manageable, as bundled battery swaps have always been recorded as deferred revenue in NIO's financial results.